The impact of technological and economic changes on industries has been pretty well examined over the years, not least as the impact of declining industries or employers has such a profound impact on the vitality of towns and even cities. Are communities able to regenerate, and develop new employment in place of what was often the dominant employer in the area? Do people leave the area in the search for new work? Do communities enter a terminal decline?
The threat of technological disruption has been well documented in recent years, and of course, the economic fall-out of the coronavirus pandemic remains largely unknown. What appears certain, however, is that the economy that emerges out of the other side of the outbreak will be very different to the one that entered it.
New research from Harvard University explores how economies, and especially workers, have responded to two of the biggest economic shocks of the past few decades to try and give us some insight. The rise of robotic automation and the increasing economic competition from China have both had a profound impact on our society, but what did they do to employment patterns?
Economic impact
The analysis reveals stark similarities between the two forms of economic shock. Both significantly reduced the demand for workers, especially in manufacturing jobs, and especially in areas that had traditionally specialized in this kind of work.
What is perhaps interesting, however, is the different response these events caused in terms of the population of these manufacturing hubs. For instance, when manufacturing jobs were lost to China, the population of manufacturing towns didn’t really change too much, but that was not the case when robots entered the sector.
“Results are striking: Despite the similar, negative effect on manufacturing employment, the two shocks have a strongly different impact on migration,” the authors write. “In particular, while robots lead to a significant reduction in population growth, Chinese imports have no detectable effect on population size.”
Mobility shock
The researchers honed in on 722 distinct commuting zones across the United States, before then dividing the 25 year study period into three blocks, covering 1990 to 2000, 2000 to 2007, and then 2007 to 2015.
The analysis revealed that three fewer people moved into a region for every robot that was added to the ‘workforce’ when compared to regions where manufacturing jobs had migrated to China. To put this into perspective, the researchers believe that for every robot installed per 1,000 humans, 370,000 fewer people moved to a region as a result. This is significant, as 190,000 robots were added to the workforce between 1993 and 2015, which the researchers believe might contribute to a 570,000 fall in people moving to areas dominated by manufacturing.
“The negative effect of robots is not confined to manufacturing employment, and you can see that pretty much everywhere,” they explain. “This can have very different implications, of course, and we find that this is entirely by people not willing to move in.”
Adjusting to change
So why did Chinese competition not have such a profound effect? After all, the researchers highlight that Chinese competition was bad for manufacturing in the United States. They suggest that population levels didn’t suffer so much because non-manufacturing professions were able to adjust within communities, with new industries emerging.
By contrast, automation was found to have had a more widespread effect across different sectors. This meant that in regions where jobs were lost to automation, new industries didn’t appear to develop in their place, and certainly not to the extent that new jobs emerged in areas affected by Chinese competition. In the Chinese-affected areas, companies would often upskill, which would attract people to the area with higher skill levels, but this didn’t occur after automation.
In areas where jobs were lost to Chinese competition, it was more common for jobs in areas such as nursing, computer science, and law to emerge.
The authors believe their findings are important, due in large part to the considerable growth in both automation and outsourcing in recent years. They believe that the number of robots are likely to double per year until 2025. This coincides with a general reduction in the levels of migration within the United States, due in part to the aging of the population.
Supporting mobility
In the face of the unrelenting march of technology, a common argument is that labor market mobility is essential to help people combat the risk of disruption to their livelihood. While considerable time and attention has been given to the topic of occupational mobility, and the challenges inherent in retraining people, perhaps less attention has been given over to geographical mobility.
It’s one of the key weapons espoused by Oxford University’s Carl Benedikt Frey in his latest book The Technology Trap. In it, he argues the case for what he refers to as ‘mobility vouchers’ to help facilitate the movement of people to more prosperous regions.
“Historically, migration was the mechanism by which cities adjusted to trade and technology shocks,” he writes. “Workers moved to areas where new industries created an abundance of well-paying, semiskilled manufacturing jobs.”
This migratory flow has become gummed up however, with the unskilled now increasingly less likely to move. Frey argues that mobility vouchers could help to cover the costs of moving to a new region, and effectively subsidize this relocation. Whether there are sufficient jobs for them when they move, however, remains far less certain, especially in the wake of the coronavirus-based recession.
